Cepu IC Santander June 2018

LATIN AMERICAN
EQUITY RESEARCH
13 JUNE 2018 INITIATION OF COVERAGE | ARGENTINA—UTILITIES
CENTRAL PUERTO BUY

A SOLID PLAY IN A GROWING AND DEFENSIVE SECTOR CURRENT PRICE: US$14.87
TARGET PRICE: US$20.20
INITIATING COVERAGE WITH A BUY RATING AND A YE2019 TARGET PRICE OF US$20.20
Net/Net: Our target price, based on a sum-of-the-parts analysis, implies 35.8% upside potential for Central Puerto (CEPU).
Our positive outlook is further supported by solid EBITDA growth prospects and a 2017-22E EBITDA CAGR of 17%,
considering new thermal and renewable facilities (16% capacity increase by 2020E) and higher energy prices (we estimate
+32% energy prices, vs. 2017’s average). We also see the valuation as attractive, as CEPU currently trades at 24% and
37% discounts to regional peers on a 2020E P/E and EV/MW basis. We see room for a strong dividend stream, as we
expect a FCF yield of 11.4% from 2020 onward.
 We expect strong EBITDA growth at a 17% CAGR for 2017-22E, Antonella Rapuano*
Argentina: Santander Rio Valores, S.A.
backed by (i) an ~17% hike in USD-denominated prices since
+54 11 4553-6278 | mrapuano@santanderrio.com.ar
November 2017 for current thermal energy; (ii) new thermal and Walter Chiarvesio*
renewable projects, yielding a 6% volume CAGR for 2017-22E and a Argentina: Santander Rio Valores, S.A.
+5411-4341-1564 | wchiarvesio@santanderrio.com.ar
6.4% average price increase by 2021E; and (iii) our estimated
Thiago Silva*
EBITDA margin improvement from 49% in 2017 to 61% in 2021. Brazil: Banco Santander S.A.
 Stock oversold, in our view, trading at discount to peers. After the +5511-3553-2555 | thiagorsilva@santander.com.br
currency slump, CEPU fell 17% from its February peak (US$18/ADR),
in line with Argentine ADRs. We believe the stock overreacted to the
macro deterioration, as CEPU is in a defensive sector, with USD-
denominated revenue and low leverage (0.2x EBITDA 2017). In
comparison with Brazilian and Chilean peers, CEPU is trading at 37% Company Statistics
and 24% discounts, respectively, to EV/MW and P/E for 2020E. Bloomberg CEPU US
 Potential high dividends, supported by strong free cash flow and low Current Price (06/12/18) US$ 14.87 / Ar$ 37.98
Target Price (YE 2019E) US$ 20.20 / Ar$ 60.60
leverage. We expect Central Puerto to reach an 11.4% FCF yield by
52-Week Range (US$) 11.94 - 18.40
2020 once expansion projects’ capex requirements lighten. Expected Market Capitalization Ar$ Mn) 57,500
cash flow generation stems from: (i) current operations; (ii) legacy Float (%) 32.0
receivables collection; and (iii) dividends received from subsidiaries. 3-Mth Avg. Daily Vol (Ar$ Mn) 84.5
Shares Outstanding - Mn 151
Estimates & Valuation Ratios Price Performance (US$)

(US$) 2017A 2018E 2019E 2020E CEPU US Merval
110
P/E - 12.7 9.3 7.6
FV/EBITDA - 8.0 6.6 5.2 100
FCF Yield (%) - (6.0) 4.8 11.4
90
Div Yield (%) - 1.9 4.5 5.2
Net Debt/EBITDA 0.1 0.5 0.4 (0.0) 80
Sources: FactSet, Santander estimates and company reports.
70
60
F-18 J-18
Sources: FactSet, Santander estimates and company reports.
IMPORTANT DISCLOSURES/CERTIFICATIONS ARE IN THE “IMPORTANT DISCLOSURES” SECTION OF THIS REPORT.

U.S. investors’ inquiries should be directed to Santander Investment Securities Inc. at (212) 583-4629 / (212) 350-3918.
* Employed by a non-US affiliate of Santander Investment Securities, Inc. and is not registered/qualified as a research analyst under FINRA rules.
CENTRAL PUERTO
Financial Highlights: P&L, Balance Sheet and CF Statement, 2017–20E in Millions Company Description
Ar$ US$ Central Puerto S.A. generates and sells electric power to
P&L ACCOUNT 2017A 2018E 2019E 2020E 2017A 2018E 2019E 2020E private and public customers in Argentina. The company
Total Revenue 5,957 9,285 14,022 18,693 351 382 492 585 generates power through thermal and hydroelectric power
YoY change (%) 12.0 55.9 51.0 33.3 0.0 9.0 28.7 18.9 plants with a total installed capacity of 3,663 MW. It also
Gross Profit 3,215 4,917 7,773 10,656 189 202 273 334 delivers steam to private customers through cogeneration
YoY change (%) 48.2 52.9 58.1 37.1 32.5 6.9 34.7 22.3 cycles. The company was founded in 1989 and is based
EBITDA 4,873 7,568 10,818 14,463 287 312 380 453 in Buenos Aires, Argentina.
YoY change (%) 27.8 55.3 42.9 33.7 14.2 8.6 21.8 19.3 Key Personnel: Osvaldo Reca (Chairman), Jorge
As % of Revenue 81.8 81.5 77.1 77.4 81.8 81.5 77.1 77.4 Rauber (CEO), Fernando Bonnet (CFO) and Tomás
Operating Income 3,111 12,040 6,511 9,254 183 496 228 290 Arshak Daghlian (Investor Relations)
YoY change (%) 15.9 287.0 (45.9) 42.1 3.6 170.6 (53.9) 26.8 Web: http://www.centralpuerto.com
As % of Revenue 52.2 129.7 46.4 49.5 52.2 129.7 46.4 49.5
Financial Results 234 (250) 648 474 14 (10) 23 15 Capacity by Technology (in MW), 4Q17
Taxes (1,052) (3,537) (2,148) (2,432) (62) (146) (75) (76)
Net Profit 3,444 4,321 6,905 9,491 203 178 242 297
YoY change (%) 58.3 25.5 59.8 37.5 41.5 (12.3) 36.2 22.6 Thermal-
Steam
As % of Revenue 57.8 46.5 49.2 50.8 57.8 46.5 49.2 50.8 Hydro and Gas
39.3% Turbines
CASH FLOW 2017A 2018E 2019E 2020E 2017A 2018E 2019E 2020E 29.6%
Depreciation & Amortization (327) (892) (1,330) (1,817) (19) (37) (47) (57)
Other Noncash Items (2,260) 2,300 (902) (551) (133) 95 (32) (17)
Changes in Working Capital 1,313 (10,097) 3,006 1,838 77 (416) 105 58
Operating Cash Flow 2,389 1,348 8,445 10,400 141 56 296 326
Capital Expenditures (3,484) (4,652) (5,393) (2,182) (205) (192) (189) (68)
Free Cash Flow (1,095) (3,304) 3,053 8,218 (64) (136) 107 257 Thermal-
Combined
Other Invest./(Divestments) 1,182 1,356 (898) 150 70 56 (32) 5 Cycle
Change in Debt 565 2,039 599 (575) 33 84 21 (18) 31.1%
Dividends (1,279) (1,060) (2,889) (3,758) (75) (44) (101) (118)
Capital Increases/Other 36 762 719 805 2 31 25 25 Ownership Adjusted EBITDA by Segment
BALANCE SHEET 2017A 2018E 2019E 2020E 2017A 2018E 2019E 2020E (ARS mn), 2017
Cash and Equivalents 1,199 231 95 4,130 64 9 3 122
Current Assets 5,811 12,806 12,763 16,484 312 474 425 486 Gas
Fixed Assets 7,431 11,080 15,143 15,508 400 410 505 457 Distribution
Total Assets 17,079 27,915 32,137 36,434 918 1,034 1,071 1,075 9.6%
Current Liabilities 5,898 4,581 7,920 9,213 317 170 264 272
Long-Term Liabilities 3,820 5,051 5,403 5,057 205 187 180 149
Shareholders' Equity 7,072 17,535 18,045 21,257 380 649 602 627
Total Financial Debt 1,985 4,023 4,622 4,047 107 149 154 119
ST Debt 506 1,321 1,561 1,331 27 49 52 39
LT Debt 1,479 2,702 3,062 2,716 80 100 102 80
Power
FINANCIAL RATIOS 2017A 2018E 2019E 2020E 2017A 2018E 2019E 2020E Generation
90.4%
Net Debt 785 3,793 4,527 (83) 42 140 151 (2)
Capital Employed 10,411 21,525 24,687 23,776 560 797 823 701
Net Debt/EBITDA 0.2 0.5 0.4 (0.0) 0.1 0.5 0.4 (0.0) Shareholder Structure, Current
Net Debt/Equity 0.1 0.2 0.3 (0.0) 0.1 0.3 0.3 (0.0)
Capex/Revenue (%) 58.5 50.1 38.5 11.7 58.5 50.1 38.5 11.7
Int Cover (%) - - - - - - - - Others
Minorities
Dividend Payout (%) 58.8 30.8 66.8 54.4 52.5 24.3 54.9 54.4 32.6%
ROCE (%) 19.8 39.5 17.7 28.7 23.9 51.7 17.7 28.7
ROE (%) 56.4 35.1 38.8 48.3 59.4 38.8 38.8 48.3 Free Float
Eduardo
32.0%
Escasany
MARKET RATIOS 2017A 2018E 2019E 2020E 2017A 2018E 2019E 2020E 5.1%
P/E - 13.5 8.4 6.1 - 12.7 9.3 7.6
Argentine
P/CE - 11.2 7.1 5.1 - 10.5 7.8 6.4 Government Plusener Guillermo
FV/EBITDA - 8.5 6.0 4.2 - 8.0 6.6 5.2 8.3% S.A. Reca
FV/EBIT - 5.4 10.0 6.5 - 5.0 10.9 8.1 10.4% 11.6%
FV/Revenue - 6.9 4.6 3.2 - 6.5 5.1 4.0
P/BV - 3.3 3.2 2.7 - 3.5 3.7 3.6 Sources for all charts and tables: Company reports and Santander
FCF Yield (%) - (5.7) 5.2 14.1 - (6.0) 4.8 11.4 estimates.
Div Yield (%) - 1.8 5.0 6.5 - 1.9 4.5 5.2
PER SHARE DATA 2017A 2018E 2019E 2020E 2017A 2018E 2019E 2020E
EPS 22.75 28.54 45.60 62.69 0.89 1.12 1.79 2.45
DPS 8.45 7.00 19.08 24.82 0.33 0.27 0.75 0.97
BVPS 46.71 115.82 119.19 140.40 1.83 4.53 4.67 5.50
2
INVESTMENT THESIS/SUMMARY
Growth projects for the next three years should lead to 17% 2017–2022E EBITDA CAGR: Central
Puerto has five new projects in the pipeline: three wind farms and two co-generation thermal plants.
These new projects imply a 16% capacity increase to 4,250 MW from 3,663 MW, according to our
estimates. CEPU has already signed long-term contracts (for between 15 and 20 years), with awarded
prices of US$34/MWh for thermal and an average US$54/MWh for wind farm projects. These prices are
above the current average of US$27/MWh. By 2021, we estimate the new projects will contribute
US$99.5 million EBITDA and 4,191 GWh generation, representing 26% and 20% of total EBITDA and
volume, respectively. In addition, Central Puerto has acquired land in Buenos Aires province and three
gas turbines with 969-MW capacity for future development. Because these assets are not yet assigned to
a specific project, we add them to our valuation at historical costs using a sum-of-the-parts approach.
Finally, Central Puerto expects to develop five additional wind farms that would increase capacity by 394
MW. As these five projects are in an early stage with no contracts closed, we do not include them in our
valuation.
The stock is trading at attractive levels, below our YE2019 target price (US$20.20), which implies
35.8% upside potential. Following the FX turmoil in late April, CEPU’s stock fell by 17% from its February
peak of US$18. In our view, the market overreacted, as our target price already accounts for higher
depreciation, inflation and country risk (currently at 450 bps). We expect credit spreads to shrink after the
government secured IMF and other multilateral organizations credit lines by US$56.5 billion last week.
Under this scenario, it is likely, in our view, that country risk will decrease to March levels, at 350 bps,
which would imply an additional US$2.00/ADR in our target price, taking upside potential to 49%.
Multiples lower than regional peers: In comparison with regional peers, Central Puerto stock is trading
at a 24% discount to 2020E P/E versus Brazil and Chile peers. Central Puerto is trading at EV/EBITDA
levels similar to the region’s gencos. Nevertheless, Central Puerto has low leverage in comparison to
Brazil and Chile peers: 0.2x versus ~2x net debt/EBITDA, on average. Central Puerto’s EBITDA is
generated mainly with equity, which makes its EV/EBITDA ratio attractive, in our view, and at similar
levels to leveraged peers. In addition, the stock is trading at enterprise value of US$500,000 per MW
capacity, which represents a 37% discount to the average for Brazil and Chile peers. As the energy
matrix becomes more efficient and the country risk compresses, electricity generators’ valuation should
converge to the region’s average of ~0.8 EV/MW, in our opinion.
3
Figure 1. Multiples Comparison
EV/EBITDA P/E
2018E 2019E 2020E 2018E 2019E 2020E
Central Puerto 7.5 6.1 5.1 13.2 9.5 7.6
Avrg Bz 6.4 5.4 4.8 16.7 11.2 10.0
AES Tiete 6.0 5.1 4.9 9.0 7.2 6.9
Cesp 6.5 5.0 4.5 28.0 16.4 15.0
Engie Brasil 7.0 5.4 4.7 10.5 7.9 6.7
Omega Geração 6.8 6.2 6.0 22.8 15.7 15.0
Eneva 5.9 5.1 4.1 13.3 9.0 6.4
Avrg Ch 7.5 6.5 6.0 13.0 10.4 9.9
Enel Gen Chile 7.3 7.3 6.7 11.7 11.9 11.1
AES Gener 7.3 7.6 7.0 8.9 8.7 7.9
Colbun 6.7 5.8 5.4 14.3 12.6 12.7
Engie Chile 8.6 5.5 5.0 17.2 8.5 8.0
CEPU’s EBITDA and NI adjusted by ownership to include non-controlling interest.
Source: Santander estimates.
Figure 2. Enterprise Value per MW of Installed Capacity Measured in USD million

1.6 1.5
1.4
1.2 1.1 1.1
BZ AVG 0.9 0.9 1.0
1.0 CHI
0.7 AVG
0.8 0.7
0.5 0.5 0.8
0.6 0.4
ARG
0.4 0.2 AVG
0.2 0.3
0.0
CEPU’s capacity includes stake in FONINVEMEM plants (+383MW) and its EV is net from gas distribution interest.
High FCF yield backed by several sources of cash inflows. In our view, the FCF yield will reach
11.4% by 2020, which should allow strong dividend streams. We expect Central Puerto to generate
average operating cash flow of US$334 million per year in the period 2019-2027. This figure includes
legacy commercial receivables collection from FONINVEMEM, which represents US$58 million per year
on average, until 2028 when the debt will be settled. (See section “FONINVEMEM Program” for further
details.) In addition, we expect CEPU will receive dividends of US$27 million per year from noncontrolling
interests in gas distribution companies (Distribuidora de Gas del Centro, DGCE, and Distribuidora de Gas
Cuyana, DGCU. (See DGCE and DGCU Valuation section for further details.) At the same time, we
4
believe capex requirements will fall to US$63 million by 2021, once the current projects in the pipeline are
completed. Nevertheless, it is possible that CEPU could become involved in new growth projects, which
would reduce our forecast for FCF.
Figure 3. Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis

Strengths Weaknesses
 Consolidated position in key locations and a  25% of current capacity belongs to old
diversified energetic matrix thermal technology
 CEPU's stake dilution in FONINVEMEM
 Reasonable dispatch at ~50%
plants
 16% capacity increase expected by 2020
 Current high GAP (36%) between energy
through new projects in thermal and
cost an price paid by users
renewable sources
 Low leverage with net debt at 0.2x EBITDA
2017
 Margin improvement expected due to
higher prices in new projects
Opportunities Threats
 Potential new wind farms: La Castellana II,  Piedra del Aguila concession expires in
Achiras II, La Genoveva II, Cerro Senillosa 2023
and Picún Leufú. Totals 394 MW.
 Potential new thermal capacity as CEPU
holds 3 gas turbines in inventory with 969  Declining prices trend in auctions
MW capacity
 Price scheme shift towards a marginal cost
 We see room for strong dividend stream
approach could led to lower margins in old
with a FCF yield of 11.4% by 2020E
capacity
 Term Market reopening for conventional
sources
Source: Santander
CENTRAL PUERTO AT A GLANCE

Consolidated position within the industry. Central Puerto is the largest private electricity generator in
Argentina. In 2017, it accounted for 19% of total energy generated, followed by Pampa Energia, AES, and
Enel, with 17% each. In full year 2017, the company generated a total of 16,464 GWh of power. As of
April 2018, it had an installed generating capacity of 3,663 MW.
5
Figure 4. SADI’s Total Power Generation by Private Companies and Market Share for 2017 (in GWh)
30%
19% 17% 17% 17% 25,182
16,464 14,829
14,120 14,163
Central Puerto Pampa Energia AES ENEL Others

Source: Company data.
CEPU’s asset breakdown is both geographically and technologically diverse. Its assets are critical
to the Argentine electric power network due to the flexibility provided by its large fuel storage capacity,
which allows it to store 32,000 tons of fuel oil (enough to cover 6.3 days of consumption) and 20,000 tons
of gas oil (enough to cover 5.7 days of consumption) at its thermal generation plants, in addition to its
access to deep-water docks, its dam water capacity and its ability to store energy for 45 days operating at
full capacity at Piedra del Águila. The prices for power transmission are regulated and based on the
distance between the generating company and the user, among other factors. In this regard, CEPU’s
thermal power plants are strategically located in important city centers or near some of the system’s
largest customers, which constitute a significant competitive advantage. For example, during 2016
approximately 39% of Argentine energy consumption was concentrated within the metropolitan area of
Buenos Aires. Because the lack of capacity in SADI (Electric Interconexion Argentine System) limits the
efficient distribution of energy generated in other geographic areas, CEPU’s generation plants in Buenos
Aires and Mendoza are essential to supplying energy to meet the high demand in these areas. In
addition, this need to generate energy close to a high consumption area in Argentina means that Central
Puerto’s plants are less affected by the installation of new capacity in other regions.
Figure 5. CEPU’s Energetic Matrix by Technology (in MW)

1%
26%
39%
3,663 Hydro
Installed
Combined Cycle
Steam Turbines
Co-Generation
34%
Source: Company data, excludes FONINVEMEM plants.
6
Figure 6: CEPU’s Thermal Power Generation by Fuel Type (in GWh)
13%
Natutal
12,763 GWh Power 17% Gas
Gas Oil
generated in 2017
by thermal units
70%
Source: Company data, excludes FONINVEMEM plants. Lujan de Cuyo’s Siemens Combined Cycle unit (306 MW installed capacity) is CEPU’s only
unit relying exclusively on natural gas
Figure 7: CEPU’s Thermal Power Generation by Fuel Type (in GWh)
Puerto Complex Lujan de Cuyo Piedra del Aguila

Steam Turbines, Gas Turbines,
Steam Turbines and
Technology two cycles and mini-hydro Hydroelectric plant
Combined Cycle
trubine generator
Installed Capacity (MW) 1,714 509 1,440
Generation (GWh)1 6,991 2,450 2,137
Availability2 91% 91% 100%

3
Sales under the Energía Base and electric 6,948 2,441 2,137
power sales on the spot market (GWh)1
Sales under contract (GWh)1 45 78 0
Energy purchases (GWh)1 2 69 0
Limay River, bordering the provinces of

Location City of Buenos Aires Mendoza Province
Neuquén and Río Negro
Concession expiration date NM NM December 29, 2023
Source: Company data, excludes FONINVEMEM plants.

1.Data for the nine-month period ended September 30,2017.
2.Information provided is for the seven-month periods ended July 31, 2017.
3.Energia Base framework is explained in the “REGULATORY FRAMEWORK” section
7
Figure 8. CEPU’s Energetic Matrix Map
1. Demand for 11M17 based on CAMMESA’s monthly report. Includes Gran Buenos Aires, Buenos Aires and Litoral; 2. Considers 100% of the
capacity of each asset. Source: Company reports.
Locked value from key location. Central Puerto’s largest plant, Puerto Complex, is strategically located
right in the heart of Buenos Aires City. Buenos Aires City and the Greater Buenos Aires account for 39%
of energy demand, and Puerto Complex generated 20% of the energy demands for this region in 2016.
Puerto Complex consists of thermal generation facilities with steam gas turbines and combined-cycle
technology. Its installed capacity reaches 1,714 MW, which represents 47% of Central Puerto’s total
capacity (3663 MW).
Figure 9. Energy Demand by Region Figure 10. Energy Generated by CEPU as % Energy Demand
45%
38%
20%
Bs As City + Cuyo Comahue

Greater Bs As
Source: Based on company data as of 2016.
8
Competitive thermal energy efficiency. CEPU’s combined-cycle plants are highly efficient, with fuel
consumption in the range of 1600-1800 kCal/kWh, according to CAMMESA’s (Compañia Administradora
del Mercado Mayorista Eléctrico) seasonal program for 2018. As of today, the combined-cycle installed
capacity totaled 1,139 MW. At the same time, the older technology of Puerto Complex steam turbines
managed to remain competitive against peers. For instance, CEPU’s steam turbines consume around
2500 kCal/kWh, similar to Pampa’s Piedra Buena central, and lower than Central Costanera’s steam
turbines, which consume around 2780 kCal/kWh. Nevertheless, we believe these old technology turbines
must be revamped in the near future. Otherwise, and if the price system shifts toward a marginal cost
approach, there is a risk that this old capacity (979 MW in Puerto Complex) could be left out of the energy
supply. (See “Evaluation of Risk Factors” section for further details.) Central Puerto has already
purchased three gas turbines with a total capacity of 969 MW that will contribute to the revamping of the
energy matrix. As these new gas turbines are still not assigned to a particular project, we did not consider
them in our operating income estimates. Instead, we add their value to CEPU’s valuation at historical
cost. Figure 11 shows the heat rate by facility of Central Puerto, Pampa Energía, and ENEL Argentina.
Figure 11. Heat Rate Breakdown by Facility

Weighted average
Kcal/kWh
Facility Capacity
consumption by
capacity
Central Puerto 2,333 2,142
Puerto CC 798 1,806
Lujan de Cuyo CC 390 1,808
Lujan de Cuyo 166 2,298
Puerto Nuevo 589 2,504
Nuevo Puerto 390 2,552
PAMPA 2,938 2,074
Genelba CC 674 1,606
Loma de La Lata CC 555 1,876
Ing White 100 2,083
Parque Pilar 100 1,942
Loma de la Lata 316 2,029
Piquirenda 30 2,150
Güemes 364 2,386
EcoEnergia 13 2,457
Piedra Buena 620 2,487
Genelba 165 2,530
ENEL 2,774 2,197
Costanera CC 1,173 1,717
Dock Sud CC 399 1,752
Costanera 1,131 2,786
Dock Sud 72 3,220
ENEL includes ENEL Generación Costanera and Central Dock Sud. Source: Santander estimates from CAMMESA data as of Feb. 2018.
9
Figure 12. Heat Rate (Kcal/kWh) for Units Operating Only with Natural Gas
2837
2605
2456 2426
1604 1617 1692

1567
Combined Cycle Steam Turbines
Central Puerto AES ENEL Pampa Energia

Figure 13. Thermal Supply Curve
Source: CAMMESA seasonal program data.
10
Central Puerto holds non-controlling interest in two gas distribution companies, a gas transportation
company and three companies, which operates thermal plants form FONINVEMEM program (see “Stake
in Gas Business” and “FONINVEMEM Program” sections for details). Figure 14 shows CEPU’s non-
controlling interest:
Figure 14. CEPU’s Non-Controlling Interest
Central Puerto
S.A.
20%
22% 40%
FONINVEMEM Distribuidora de Transportadora
operating Distribuidora de de Gas del
Gas del Centro
companies Gas Cuyana S.A. Mercosur S.A.
S.A.
Termoelectrica
31%
Jose de San
Martin S.A.
Termoelectrica
31% Manuel Belgrano
S.A.
Central Vuelta de
56% Obligado S.A.
EARNINGS OUTLOOK
Revenue is driven by two factors: (1) legacy assets that charge energy at prices set by Resolution 19,
which went into effect in November 2017 and (2) new thermal and renewable projects that add volume
and are subject to higher prices. (See “Growth Drivers and Prospects” section for further details.) The
older energy prices are currently regulated by Res. 19/2017, which introduced a tariff hike in November
2017. Thus, the full impact of the new regulation will be seen in 2018. Subsequently, revenue growth will
stem from the volume gradually added by new projects that are remunerated at energy prices higher than
the old prices. These new projects hold awarded prices of US$34/MWh for thermal and an average
US$54/MWh for wind farms, which are above the current average of US$27/MWh. We expect revenue to
stabilize by 2021.
11
Figure 15. Revenue Breakdown and Growth—CAGR 2017–2022E 12.41%
Revenues in US$ mn
2% 2% 2%
100% 4% 6% 4% 5% 5% 700
90% 630 630
16% 585
80% 22% 22% 600
492
70% 500
60% 382
400 351
50% 100% 96% 92%
40% 77% 300
72% 72%
30%
200
20%
10% 100
0% 0
2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022
Old energy New Thermal New Renewable Others 2017 2018 2019 2020 2021 2022
Sources: Santander estimates and actual figures from company’s report.
We expect EBITDA margins to expand to 61% by 2021 as operating cost reduces its weight as a
percentage of revenue. We see this trend resulting from the following factors: (i) although we expect
labor costs to increase above inflation in the first three years to account for employees at new plants, we
believe labor costs will grow more slowly than revenue, ending up at 9% of revenue in 2021E vs. 15% in
2017; and (ii) economies of scale, as increasing volumes at new projects enable CEPU to reduce the
weight of SG&A, which represented 11% of revenue in 2017 but should level off at 7% by 2021E. Net
income jumps in 2018E due to FX revaluation on the accounting of FONINVEMENT credits. (See
“FONINVEMEM” section for further details.) We estimate an after-tax FX gain of US$229 million in 2018
from receivables revaluation. In 2017, NI was adjusted by the results from associates in order to reflect
only the profit from Central Puerto and enable a year-over-year comparison on a homogeneous basis.
Figure 16. EBITDA and NI Evolution (US$ in millions)—CAGR 2017-2022 17% and 14%, Respectively
450 59% 61% 61% 70% 400

400 54% 56% NI
49% 60%
350
50% 300
300
250 40%
200
200 383 382 30% 340
347
150 275 264 260
20% 228
100 205 100 176
170 135
50 10%
- 0% -
2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022
EBITDA EBITDA Margin 2017 2018 2019 2020 2021 2022
Sources: Santander estimates and actual figures from company’s report
12
VALUATION
DCF model approach. Our target price for YE2019 is based on a 10-year discounted cash flow model,
assuming perpetuity, with a long-term growth rate of 2.5%. In the first two years, we believe the company
will be able keep capex close to US$190 million due to the wind farms and thermal plants pipeline. In
2020 onward, we expect potential high dividend payments, according to our assumption of the company’s
75% payout ratio. DCF valuation parameters for Central Puerto are shown in Figure 17.
Figure 17. Central Puerto DCF Valuation Model

US$ mn 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E
Operating Income 290 329 330 332 332 333 333 333 339 339
Tax (87) (101) (106) (106) (107) (106) (106) (107) (105) (110)
Depreciation 57 54 52 51 50 49 49 48 45 45
D WC 58 56 42 40 40 40 41 41 (2) (1)
Capex (68) (63) (63) (63) (63) (63) (63) (63) (63) (63)
FCFF 249 274 255 254 252 253 253 252 214 210
Discounted FCFF 225 223 188 170 152 138 124 112 86 76
= 10Y NPV 1,495 Risk Free 3.0%

+ Perpetuity (2.5%) 957 Country Risk 4.5%
- Net Debt 2019E 151 Mkt Prem 5.5%
+ Assoiates 2019E 619 Beta 1.00
+Turbines & Land 134 Ke 13.0%
= 2019E Equity 3,053 Cost of debt 8.00%
# ADRs 151 Tax Rate 35.0%
TP YE2019E 20.2 kd (1-t) 5.2%
Market Price/ADR 14.9 Eq/Cap 70.0%
Price Appreciation 35.8% WACC 10.66%
Perpetuity 2.5%
Upside Potential 35.8%
We highlight the following main assumptions:
Figure 18. Main Assumptions
2016 2017 2018E 2019E 2020E 2021E 2022E
Volume in GWh 15,645 16,607 13,711 17,279 19,618 20,877 20,877
Avg Price in US$/GWh 22 21 28 28 29 30 30
Capex (US$ mn) 144 205 192 189 70 63 63
FONINVEMEM collection (US$ mn) 20 21 78 78 60 55 55
Sources: Santander estimates and company data.
13
 Volume: 4.7% CAGR 2017-2022E, sustained by new capacity from thermal and renewable
generation.
 Price: Prices will show a hike in 2018, since the new remuneration came into effect in November
2017. (See “Regulatory Framework–Energía Base or Legacy Energy Remuneration” section for
further details.) In 2018 onward, the average price increases in-line with the prices awarded in the
new projects’ auctions, leveling off at US$29.70/GWh in 2021, according to our estimates.
 Capex: CEPU has been experiencing high capex growth since 2015, mainly due to the
acquisition of gas turbines for new projects that totaled US$163 million. We estimate capex will
remain strong until 2019 due to the new capacity’s capital requirements. Thereafter, we expect
capex to stabilize at US$60 million, a conservative maintenance figure, which will enable the
company to revamp old facilities over a period of 17 years, in our view.
 FONINVEMEM collections: FONINVEMEM installments, applied to cancel receivables, imply

~US$22 million in 2018E and 2019E from the plants of generating companies TMB and TJSM,
and ~US$55 million annually from generation plant CVOSA from 2018 until 2027. when the
commercial debt will be settled. (See “FONINVEMEM” section for further details on
FONINVEMEM, TMB, and TJSM.)
Figure 19. Volume Growth (in GWh)
Sources: Santander estimates and company data.
In addition to the DCF model components, we add the value of CEPU’s stake in Distribuidora de Gas del
Centro (DGCE) and Distribuidora de Gas Cuyana (DGCU), and the turbines and land in inventory at their
historical cost.
14
TARGET PRICE SENSITIVITY ANALYSIS
Sensitivity Analysis to Country Risk and Long-Term Growth. We use 4.5% country risk and 2.5%
long-term growth in our base-case scenario, which leads to our YE2019 target price of US$20.20/ADR,
with 32% upside potential. In a worst-case scenario with 6.5% and 1.5% country risk and long-term
growth, the target price would drop by US$3.40/ADR, which implies 12.7% upside potential. However, if
the country risk compressed at 3.5%, which is the pre-currency-crisis level, the TP would be
US$2.00/ADR higher, with upside potential of 49%. Note that the stock’s TP sensitivity to country risk is
low, due to the high free cash flow at the beginning of the forecast period, caused by the receivables
collection from FONINVEMEM.
Figure 20. Target Price and Upside Potential Sensitivity to Country Risk and Long-Term Growth
TP Sensitivity to Country Risk and Perpetuity Upside Potential Sensitivity to Country Risk and Perpetuity
20 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.5% CEPU US 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0%
1.5% 22.2 21.2 20.3 19.5 18.7 18.0 16.8 1.5% 49.3% 42.6% 36.5% 31.1% 25.8% 21.0% 13.0%
2.0% 22.8 21.7 20.7 19.8 19.0 18.3 17.1 2.0% 53.3% 45.9% 39.2% 33.2% 27.8% 23.1% 15.0%
2.5% 23.4 22.2 21.2 20.2 19.4 18.6 17.3 2.5% 57.4% 49.3% 42.6% 35.8% 30.5% 25.1% 16.3%
3.0% 24.1 22.8 21.7 20.7 19.8 19.0 17.5 3.0% 62.1% 53.3% 45.9% 39.2% 33.2% 27.8% 17.7%
3.5% 25.0 23.5 22.3 21.2 20.2 19.3 17.8 3.5% 68.1% 58.0% 50.0% 42.6% 35.8% 29.8% 19.7%
Sensitivity analysis for energy dispatch. Figure 21 details our sensitivity analysis of Central Puerto
base-case target price to cost of equity (nominal terms) and energy dispatch of the plants currently in
operations. As expected, the target price is highly sensitive to energy dispatch, which is measured as a
percentage of energy sold over the potential maximum generation. In our base case, we use 52% for
energy dispatch and an 11.66% cost of equity.
Figure 21. Target Price Sensitivity to Energy Dispatch
TP Sensitivity to Energy Dispatch and Ke

20 9.2% 9.7% 10.2% 10.7% 11.2% 11.7% 12.7%
65% 27.6 26.1 24.9 23.7 22.7 21.8 20.3
60% 26.0 24.6 23.4 22.4 21.4 20.6 19.2
52% 23.4 22.2 21.2 20.2 19.4 18.6 17.4
45% 21.2 20.1 19.2 18.3 17.6 16.9 15.8
40% 19.6 18.6 17.8 17.0 16.3 15.7 14.7
VALUE FROM ASSOCIATES AND FIXED ASSETS IN INVENTORY

In order to value Central Puerto’s investment in other assets we follow the approaches described below:
 DGCE and DGCU: We created a DCF model for each company. Details of these models are
described later in this section.
 FONINVEMEM plants: We value CEPU’s stake in FONINVEMENT (TMB, TSM, CVO) plants
assuming US$1.0 million replacement value per MW for combined-cycle plants. This is in-line
with Central Puerto’s new co-generation projects, which hold an average replacement value of
US$1.09 million per MW.
15
 Fixed assets in inventory: Central Puerto has three turbines, with 969 MW total capacity,
acquired in 2015 and 2016 for a total of US$121.3 million. In addition, the company acquired land
in Buenos Aires province at US$13 million. Central Puerto plans to utilize these turbines and land
for the construction of new plants. In a conservative approach, we value these assets at their
historical cost, as they are not yet assigned to a specific project. Instead, if we had added these
turbines to the installed capacity, our target price would have increased by USD1.70.
Figure 22. Associates and Fixed Assets Valuation

Associates Stake Capacity M W Price per M W in USD Value in USD mn NPV 2019YE CEPU's stake in USD mn
DGCE 39.69% 525 208
DGCU 22.49% 437 98
TMB 15.00% 873 1,000,000 873 838 126
TSM 15.00% 865 1,000,000 865 830 124
CVO 16.80% 816 1,000,000 816 368 62
GE GT 373 50 50
Siemens 2 GT 596 71 71
Bs As land 13 13
753
Figure 23. NPV Contribution from Units

Assets on Hold
FONINVEMEM 5%
10%
DGCU
3%
DGCE
7%
Power
Generation
under CEPU
75%
DGCE AND DGCU VALUATION

Gas distribution sector. DGCE and DGCU, which are of similar size, are both engaged in the gas
distribution business. They have exclusivity to operate in Cordoba, La Rioja, Catamarca, Mendoza, San
Luis, and San Juan provinces. The concession for these operations finishes in 2027 and is extendable for
10 more years. This business is regulated by ENARGAS, which performs an integral tariff revision (RTI)
every five years, where it determines RAB, WACC, regulatory EBITDA, and a mandatory investment plan.
The most recent RTI for DGCE and DGCU was determined in March 2017 by Res. 4359/17 and 4360/17,
16
with a RAB of Ar$4.7 billion for DGCU and Ar$4.5 billion for DGCE, and a WACC at 9.33% in real terms
of local currency for both companies.
DCF model approach. Our valuation for YE2019 is based on a seven-year discounted cash flow model,
assuming perpetuity with a long-term growth rate of 2.5%. The model’s main assumptions follow:
 Strong cash flow driven by new tariff scheme and volume growth. The most recent RTI
determined a real tariff increment of around 150% and a semiannual adjustment by wholesale
inflation. DGCE has a volume growth assumption greater than DGCU (five-year CAGR 3.8% vs.
3.3%) due to an expansion plan financed by Cordoba province, which could add as many as 30%
more customers in the long term.
 Strong EBITDA growth. Our model forecasts that EBITDA will double in five years and remain
stable afterward. In addition, we expect both companies to show efficiency gains, which should
enable them to present better than regulatory EBITDA. Nevertheless, we estimate the next RTI
will absorb 70% of the efficiency gain, which explains the EBITDA drop we project for 2022.
 Robust dividend yield. Solid cash on hand from operations and a completely unleveraged
capital structure enables DGCU to distribute high dividends. We estimate a 6.6% dividend yield
for DGCU by 2019.
 Capex: Follows the mandatory investment plan adjusted by inflation till 2021.
 WACC in US$: 11.00%; beta 0.9; and capital structure E/C 0.8. The remaining WACC
components are the same as those for CEPU’s model.
Figure 24. DGCE and DGCU DCF Valuation Model
DGCE in USD mn 2016 2017 2018E 2019E 2020E 2021E 2022E DGCU in USD mn 2016 2017 2018E 2019E 2020E 2021E 2022E
Revenues 146 219 326 390 435 449 448 Revenues 106 168 252 302 337 346 347
EBITDA 6 49 84 85 87 92 83 EBITDA 7 39 71 70 73 76 72
EBITDA Margin 4% 22% 26% 22% 20% 20% 18% EBITDA Margin 6% 23% 28% 23% 22% 22% 21%
NI 9 46 61 63 66 68 61 NI 9 35 51 51 55 56 51
CAPEX -21 -16 -19 -23 -15 -10 -13 CAPEX -8 -13 -21 -17 -21 -25 -14
DCGE in ARS mn 2018E 2019E 2020E 2021E DCGE in ARS mn 2018E 2019E 2020E 2021E
EBITDA Model 1915 2319 2669 3064 EBITDA Model 1783 2084 2399 2538
Regulatory EBITDA 1532 1833 2158 2392 Regulatory EBITDA 1557 1865 2153 2418
Difference % 25% 26% 24% 28% Difference % 15% 12% 11% 5%
Source: Santander estimates. Regulatory EBITDA is adjusted by Santander’s inflation forecast for each period.
17
GROWTH DRIVERS AND PROSPECTS
THERMAL PROJECTS
Lujan de Cuyo and Terminal Six Co-Generation Plants. Central Puerto was awarded two co-
generation projects in the auctions that took place on August 9, 2017, and September 25, 2017, under
Resolution 287/17. (For further details, see the section “Industry Competitive Analysis—Thermal
Auctions.”) The newly awarded Terminal 6 San Lorenzo and Luján de Cuyo projects have the following
two potential sources of income: (i) electric power sales to CAMMESA through capacity and energy
supply agreements (PPAs) with a 15-year term, which are priced in U.S. dollars; and (ii) steam sales
pursuant to separate steam supply agreements negotiated with private offtakers, which are expected to
be priced in U.S. dollars. CEPU signed a PPA with CAMMESA on January 4, 2018; it signed steam
supply agreements with T6 Industrial S.A. and YPF on December 27, 2017, and December 15, 2017,
respectively.
Figure 25. Thermal Projects Pipeline
Terminal 6 - San Lorenzo Lujan de Cuyo
San Lorenzo, Lujan de Cuyo, Mendoza

Location
Santa Fe Province province
Expected commercial operation date May-20 Nov-19
Estimated total capital expenditure

US$ 284 mn US$ 91 mn
(excluding VAT)
Awarded electric capacity 330 MW 93 MW
Technical configuration Co-generation Co-generation
Electric energy segment:
Awarded electric capacity price per MW

US$ 17,000 per month US$ 17,100 per month
of installed capacity
US$ 8 per MWh for natural gas
Awarded generated energy price US$ 10 per MWh for gas oil US$8 per MWh
Contract length 15 years 15 years
PPA signing date 1/4/2018 1/4/2018
Steam segment:
Steam production capacity 350 tons per hour 125 tons per hour
Steam buyer T6 Industrial S.A. YPF
Contract length 15 years 15 years
18
These thermal projects have awarded prices above the current remuneration scheme under Resolution
19/2017. Awarded prices do not include fuel cost, as it is provided by CAMMESA, likewise the old energy
system in Res 19/2017. In our projections, the new thermal projects account for 21% of total revenue
from 2021 onward and 17% of total volume, which reflects the price gain. (Price comparison charts are
below.)
Figure 26. Price Comparison
Price per MW capacity per month in USD Base energy price per MWh for
Natural Gas fuel in US$
25,000
21,897
20,500
9 8
20,000 17,050 8
7
15,000
6 5
5
10,000 7,000 4
3
5,000
2
1
-
0
Current Avg Pampa Avg CEPU's
Current CEPU's awarded
scheme Awarded Genelba awarded
Remuneration Res. projects Res.
Res. 19/17 Projects Project projects
19/2017 287/2016
Base Price Res. awarded Res. 287/16
21/2016 Res.
287/2016
Sources: Company data, CAMMESA, Pampa Energia’s investor presentation, Resolution 19/2017.
RENEWABLE PROJECTS
Within the framework of the RenovAr Program (see section “Industry Competitive Analysis—Renewable
Sources Initiatives”), CEPU was awarded three wind farm projects with the characteristics set forth in
Figure 23. CEPU signed the PPAs for two wind farms with CAMMESA in January and May 2017; the
remaining contract for the last wind farm project is expected to be signed by August 2018, according to
CEPU.
19
Figure 27. Renewable Projects in the Pipeline
La Castellana Achiras La Genoveva
Province of Buenos Province of Province of Buenos

Location
Aires Cordoba Aires
Expected commercial operation date Jul-18 Jun-18 May-20
Estimated total capital expenditure

US$148 mn US$74 mn US$105 mn
(including VAT)
Awarded electric capacity 99 MW 48 MW 86.6 MW
Awarded price per MWh US$61.50 US$59.38 US$40.90
Contract length 20 years 20 years 20 years
Estimated by
PPA signing date Jan-17 May-17
Aug-18
Renewable projects’ contribution to CEPU’s position. In our view, these projects contribute to
consolidating CEPU’s position, as (i) renewable sources of energy have dispatch priority; (ii) they diversify
CEPU’s energy matrix, even though its stake is still small (4% of installed capacity by 2020); and (iii) the
awarded prices are higher than the current scheme’s remuneration, providing a good source of income.
One risk of the new renewable projects auctions relates to the awarded price, which has been
declining since the first round of the RenovAr Program. For instance, La Genoveva’s project price is 50%
lower than the first project CEPU was awarded, La Castellana (US$40.90/MWh vs. US$61.50/MWh).
Thus, we do not see upcoming profitable projects within the RenovAr Program framework. Nevertheless,
the Market of Renewable Sources (MATER; for further details, see section “Industry Competitive
Analysis—Renewable Sources Initiatives”) could provide new growth opportunities for Central Puerto, in
our view.
20
POTENTIAL SOURCES OF GROWTH
Central Puerto expects to submit bids in future rounds of the RenovAr Program and/or to develop new
wind farms in order to supply large users in the MATER, including the projects listed in Figure 27.
Figure 28. New Potential Projects
Potential Renewable Potential Power Regulatory

Location
Project Source Capacity in MW Framework
Bahia Blanca,
La Castellana II Wind 15.75 MATER
Buenos Aires
Achiras,
Achiras II Wind 81.9 MATER
Córdoba
Bahia Blanca,
La Genoveva II Wind 97.02 MATER
Buenos Aires
Senillosa,
Cerro Senillosa Wind 100 RenovAr
Neuquén
Picún Leufú,
Picún Leufú Wind 100 RenovAr
Neuquén
As these projects have not been awarded or included in any agreement with large users within the
MATER, we do not include them in our valuation. Instead, they remain as potential growth projects with
further potential upside for the stock still to be determined.
Potential growth from turbines in inventory. Central Puerto acquired one General Electric (GE) gas
turbine in March 2015 and two Siemens gas turbines in May 2016 for US$50.4 million and US$70.9
million, respectively. The GE turbine has 373 MW capacity and the Siemens turbines have 298 MW
capacity each. Central Puerto plans to utilize these turbines in the construction of combined-cycle plants
through a new thermal bidding process. Because of the lack of visibility on these potential projects, we
have not included them in our valuation. Instead, we added the turbines’ value at their historical cost in
US$ to our DCF calculation. (For further details, see section “Valuation.”) Nevertheless, we believe the
turbines could be applied to the revamping of CEPU’s energy matrix and thus it not necessarily implies an
increasing of the existing capacity.
21
CORPORATE STRUCTURE
Figure 28 shows Central Puerto’s corporate structure.
Figure 29. CEPU’s Corporate Structure
Central Puerto
S.A.
70.19% 30.87% 30.94% 56.19% 22.49% 39.69%
Termoelectrica Termoelectrica Distribuidora de

CP Renovables Central Vuelta de Distribuidora de Other
Jose de San Manuel Belgrano Gas del Centro
S.A. Obligado S.A. Gas Cuyana S.A. companies:
Martin S.A. S.A. S.A.
100% 100%
CP La Castellana
Proener S.A.U.
S.A.U
100% 97%
Parques Eólicos Central Aimé

Australes S.A. Painé S.A.
100% 20%
Transportadora
CP Achiras S.A.U. de Gas del
Mercosur S.A.
100% 2.45%
Energia
CP Achiras II
Sudamericana
S.A.U.
S.A.
100%
CP Patagones
S.A.U.
CP RENOVABLES
CEPU holds a controlling interest in CP Renovables, with a 70.19% stake. The subsidiary was created in
2016 to carry over CEPU’s renewable sources projects such as the three wind farms currently under
construction: La Castellana, Achiras, and La Genoveva. As of this writing, the wind farms under the CP
Renovables umbrella are in the development stage, and thus they accounted for a loss of Ar$40 million,
equaling 1.25% of CEPU’s 2017 full year net income.
STAKE IN GAS BUSINESS

Central Puerto holds noncontrolling participation in three gas utilities companies: Distribuidora de Gas del
Centro S.A. (DGCE), Distribuidora de Gas Cuyana S.A. (DGCU), and Transportadora de Gas del
Mercosur (TGM). DGCE and DGCU distribute gas in Córdoba, La Rioja, Catamarca, Mendoza, San Luis,
and San Juan provinces. Central Puerto intends to sell its stake in both companies, as stated in a March
12, 2018, company press release. TGM owns a natural gas pipeline extending from Aldea Brasilera (in
the province of Entre Rios) to Paso de los Libres (in the province of Corrientes). It was used for gas
exports to Brazil. In 2009, TGM terminated its contract with YPF, TGM’s only customer at the time, as a
result of YPF’s repeated breaches. On December 22, 2017, YPF agreed to pay TGM, without recognizing
any facts or rights, US$114 million in order to end TGM’s claim against YPF. As Argentina’s gas domestic
22
production does not fulfill demand, leading to gas import, gas exports are very unlikely in the near future,
in our view. Thus, we believe TGM will not have any operating income and will not contribute to CEPU’s
net income.
Figure 30. NI from Associates

2017
NI from Associates Ar$ 000 % CEPU's NI CEPU's Stake
Termoeléctrica José de San Martin S.A. 22,218 0.6% 30.87%

Termoeléctrica Manuel Belgrano S.A. 23,557 0.7% 30.94%
Distribuidora de Gas Cuyana S.A. 135,197 3.9% 22.49%
Distribuidor de Gas Centro S.A. 287,325 8.2% 36.69%
Transportadora de Gas del Mercosur S.A. 247,667 7.1% 20.00%
Others -963 0.0%
Total Associates 715,001 20%
CEPU's total NI 3,507,795
Source: Company financial statement.
Source: Company Financial Statement
FONINVEMEM PROGRAM
Payments received by gencos did not cover energy cost and generated substantial receivables.
Within the context of the 2002 economic crisis, the Argentine federal government set the price paid by
distributors below the spot market price in the wholesale electric market (MEM for its acronym in
Spanish). This resulted in a system where CAMMESA only paid for the variable generation costs and
power capacity, while the remaining obligations for the unpaid balance were to be considered receivables
from CAMMESA without a fixed due date (LVFVD for its acronym in Spanish).
A plan to collect receivables by funding new capacity. In 2004, the federal government created
FONINVEMEM (a fund for investments required to increase the electric power supply) by enacting
Resolution SE No. 712/04. The fund financed the construction of new combined-cycle plants and enabled
the generators that agreed to participate to collect payments from LVFVD once the plants were operative.
CEPU’s participation in FONINVEMEM program and collection schedule. In December 2004, Central
Puerto agreed to participate in the creation of the FONINVEMEM. The agreement stated that generators
would receive (i) their receivables relating to sales of electric power from January 2004 through
December 2006, amounting to US$157 million for CEPU, plus an interest rate of 360-day LIBOR (which
as of September 29, 2017 was 1.78233%) plus 1% in 120 equal, consecutive monthly installments, and
(ii) their proportional equity interest in the generating companies formed for such projects,
Thermoelectrical José de San Martin (TJSM) and Thermoelectrical Manuel Belgrano (TMB), which are in
charge of running the new power plants, and after ten years of operation would receive the property of
these plants. The generation plants are not owned by TJSM and TMB but rather owned by two trusts,
created by the Argentine government, that receive revenue from the sale of electric power generated by
the plants, among others, to repay the LVFVD receivables. CEPU’s stake in TMB and TJSM is 30.94%
23
and 30.87%, respectively. The operating companies have variable revenue (US$1.00 per MW generated)
and fixed revenue to offset their operating costs. In 2017, CEPU collected dividends from TJSM and TMB
in the amount of Ar$36 million. On July 13, 2007, CEPU agreed to include in the FONINVEMEM
arrangement 50% of its total receivables relating to the sale of electric power to CAMMESA from January
through December 2007, which totaled US$30.3 million.
Program extension by the construction of a new plant, Vuelta de Obligado. On December 28, 2010,
CEPU entered into a new FONINVEMEM agreement to settle receivables accrued by generators over the
2008-2011 period. For that purpose, (i) the construction of the new generation plant, Central Vuelta de
Obligado S.A. (CVOSA), was agreed upon, with receivables earned in that period to be paid starting as of
the commercial launch date of the plant in the form of 120 equal, consecutive monthly installments,
bearing interest at a nominal annual rate of 30-day LIBOR (which as of September 29, 2017 was
1.23222%) plus 5.00%; (ii) a managing company for this project, CVOSA, was created in which CEPU
hold a controlling interest; and (iii) a trust was created by the Argentine government to hold the property
of the plant under construction. As with TMB and TJSM, CVOSA will receive the property of the plant after
10 years of operation. CEPU’s stake in CVOSA is 56.19%. CVOSA started operation on March 20, 2018,
as expected.
STATUS OF RECEIVABLES LINKED TO TMB AND TJSM

Both plants, TMB and TJSM, started operations in 2010 (in January and February, respectively) and
CEPU started to collect the LVFVD according to the agreement. By December 31, 2016, the remaining
LVFVD linked to TMB and TJSM totaled US$64.04 million.
STATUS OF RECEIVABLES LINKED TO CVOSA

As of May 2018, the commissioning process began for the CVOSA plant, which implies the beginning of
collection of the US$545 million receivables. FONIVEMEM receivables associated with CVOSA accrue
interest at 30-day LIBOR +5% and will be collected in 120 monthly installments. This transaction resulted
in a one-time gain of Ar$7,959 million, increasing 1Q18 adjusted EBITDA by 21 times to Ar$9,683 million.
CEPU’S STAKE: POTENTIAL DILUTION

In accordance with the agreements for each project, after the first ten years of operation, ownership of the
combined-cycle plants will be transferred from the respective trusts to the operating companies, and the
operating companies will begin to receive the revenue from the sale of electric power generated by the
plants. At such time, since the Argentine government financed part of the construction, it will be
incorporated as a shareholder of TJSM, TMB, and CVOSA, and CEPU’s interests in TJSM, TMB, and
CVOSA may be diluted. According to CEPU, in the case of CVOSA, although the effect of the potential
dilution has not yet been defined, the Argentine government’s stake in CVOSA will be at least 70% due to
an agreement between the parties. In the case of TMB and TJSM, the Argentine government’s stake also
depends on the funds it provided for the construction of the plant, but it has not yet been defined.
Nevertheless, we expect the government’s stake will be no less than 50% in each of them.
24
Under those assumptions, CEPU’s stake in TMB, TJSM. and CVOSA will be 15%, 15%, and 16.8%,
respectively, once the plants are transferred to the operating companies and the government becomes
the controlling shareholder.
Figure 31. CEPU’s Stake in FONINVEMEM Plants
FONINVEMEM Plants MW Capacity CEPU’s Stake CEPU's Potential Stake Post-Dilution

TMB 873 30.5% 15.0%
TJSM 865 30.5% 15.0%
CVOSA 816 56.2% 16.8%
Sources: Company’s financial statements and Santander estimates.
CF ESTIMATE FROM FONINVEMEM

The collection of LVFVD from FONINVEMEM is incorporated in our DCF through a positive working
capital variation consistent with the installments in US$ converted to AR$ by our exchange rate forecast
in each period. We estimate the FONINVEMEM inflows at an average of US$60 million per year in the
period 2018-2027.
STAKES IN OTHER COMPANIES

CEPU holds interest in Proener S.A.U., Central Aimé Painé S.A., and Energia Sudamericana S.A
(ESSA). Proener S.A.U. is engaged in the commercialization and transportation of fuels, both
domestically in Argentina and internationally, and in providing consulting and technical assistance
services to the energy industry. Central Aimé Painé S.A. is a company engaged in managing the
purchase of equipment and buildings, and in operating and maintaining power plants, both domestically in
Argentina and internationally. ESSA’s principal activity is the sale of natural gas. Due to the negligible
impact of ESSA on CEPU’s results, it is not included in our valuation. CEPU holds a 100% and 97% stake
in Proener and Central Aimé Painé, respectively. Thus, these two companies are valued within CEPU’s
model.
25
EVALUATION OF RISK FACTORS
Price scheme shift toward a market approach, which means: (i) CAMMESA would stop providing fuel
and gencos would need to purchase it in the market and include it in their cost structure; and (ii) the
energy price received by gencos would be determined according to the system marginal cost, instead of
being fixed by the regulator as it is now. This approach could negatively affect the company, as old
technology (which consumes 50% more fuel than combined-cycle plants and represents 25% of total
capacity) could not generate operating income if it is positioned at the right of the point where the supply
curve meets demand. Nevertheless, the change could have a positive impact, as (i) the company could
negotiate lower fuel prices, gaining efficiency in old technology plants; and (ii) investments in new
combined-cycle plants will eventually contribute to revamping their facilities, becoming more efficient.
(The company has already purchased gas turbines with 969 MW power capacity.) Due to the current gap
between energy cost and price paid by final user, we do not expect a change in the current scheme in the
short term. (See “Regulatory Framework” section for further details.)
Figure 32. Natural Gas Potential Consumption per MW Capacity

6.8 7.0
4.6
Puerto combined Nuevo Puerto - Puerto Nuevo -

cycle Steam turbines Steam Turbines
Potential Natural gas consumption per day in thousands of

m3 over MW of installed capacity
Source: Elaborated from Company reports.
Non-renewal of Piedra del Aguila Hydroelectric plant concession: impact on CEPU. Non-renewal of
this concession would reduce the installed capacity of the company by 38% (1,440 MW) and its
generation volume by 24%, according to 2017 full year figures, when 3,719 MWh of 15,650 MWh came
from Piedra del Aguila. The concession expires on December 29, 2023, and upon expiration, the
Argentine government will recover possession of the plant without any obligation to compensate the
company. Central Puerto intends to renew HPDA’s concession agreement prior to its expiration. In terms
of revenue, Piedra del Aguila accounted for 13.9% of the company’s total revenue in the nine-month
period ended September 30, 2017. If the concession ends in 2023, our 2019 target price would drop by
~US$0.80, assuming a load factor increase to 0.75.
Expansion projects execution risk. Central Puerto has several projects in the pipeline, such as wind
farms and co-generation thermal plants, that total 656 MW of capacity. The company expects it will start
operations between June 2018 and May 2020. We estimate these projects will account for 3.8%, 6.3%,
18.9%, and 25.3% of EBITDA in 2018, 2019, 2020, and 2021, respectively. Any delay in these projects
will delay the expected increase in EBITDA. In addition, the capex required could exceed Central Puerto
estimates, which currently are in-line with our valuation.
26
FX lagging inflation could lead to lower financial figures when they are translated to US$, given that
revenue is denominated in US$ while part of the costs are in local currency. Even though, the Ar$ per
US$ quote evolved similar to the Wholesale Price Index (WPI) in the last 12 years, the risk of any
uncoupling between these two variables remains. (See Figure 29.)
Figure 33: FX and WPI Evolution (Base 2005 = 100)
700
600
500
400
300
200
100
0
Wholesale Price Index Ar$/US$ Index

Sources: INDEC and Central Bank.
INDUSTRY COMPETITIVE ANALYSIS/STRATEGIC ANALYSIS

REGULATORY FRAMEWORK
In the early 1990s the Argentine government undertook an extensive privatization program of all
major state-owned industries, including those in the electric power generation, transmission, and
distribution sectors. The privatization had two ultimate objectives: (i) to reduce tariffs and improve service
quality through free competition in the market, and (ii) to avoid the concentration of control of each of the
three subsectors of the market by a small group of participants. Decree No. 634/1991 established
guidelines for the decentralization of the electric power industry, for the basic structure of the electric
power market, and for the participation of private sector companies in the generation, transmission,
distribution, and administration subsectors.
Sector participants: Major participants in the sector include ENRE (Ente Nacional Regulador de la
Electricidad) as regulator, CAMMESA (Compañía Administradora del Mercado Mayorista Eléctrico) as
wholesale market coordinator, generators, and distributors. CAMMESA is in charge of dispatch
coordination, wholesale price determination, and the administration of the economic transactions.
CAMMESA also acts as a collection entity for all wholesale market (MEM) agents. The shareholders of
CAMMESA each hold 20% stakes, and they include the Argentine government (represented by the
Ministry of Energy and Mining) and the four associations representing the different segments of the
electric power sector (generation, transmission, distribution, and large users). CAMMESA has temporarily
been tasked with the role of acquiring and supplying the fuel for the electric power sold under the
“Energía Base” framework, which is cost-free for generators. (The various frameworks are described later
in this section.)
27
According to privatization law, the MEM consists of the following:
 a term market, where contractual quantities, prices and conditions are freely agreed upon among
sellers and buyers;
 a spot market, where prices are established on an hourly basis based on the economic
production cost, represented by the short-term marginal cost measured at the system’s load
center (market node); and
 a quarterly stabilization system for spot market prices, intended for the purchases of electric
power by distributors.
Figure 34. Wholesale Electricity Market
Source: Company report.
Electricity dispatch and spot market pricing mechanism in force in the 1990s. In accordance with
the spot market in place prior to the Energía Base framework, electric power is traded at prices reflecting
supply and demand. CAMMESA dispatches the available power units based on the variable costs of
production determined by the generation agents, dispatching the most efficient power units first. The spot
market price is determined by CAMMESA. The energy price consists of a value referred to as the
“marginal system price,” or “market price,” and represents the economic cost of generating the next MWh
to satisfy an increase in demand at the same value. The seasonal price (paid by distributors) fixing
system is directly related to the quarterly average prices in the spot market. The regulatory framework
created the Stabilization Fund that absorbs the differences between the seasonal price and the spot price
in the MEM.
The Public Emergency Law in 2002 froze seasonal prices. In spite of an increase in the spot price, the
seasonal price remained frozen for all users until 2004, when a partial adjustment was adopted that did
not affect residential demand. As a result, the amounts collected based on seasonal prices have been
lower than the amounts based on spot prices, therefore increasing the Stabilization Fund’s deficit. In
28
2016, under the Macri administration, the Ministry of Energy and Mining determined to gradually
implement a normalization program, which acknowledged the gap between actual costs and prevailing
prices; nevertheless, currently the seasonal price remains below actual supply costs.
Figure 35. Seasonal Price-Cost GAP (in Ar$) Figure 36. Subsidy as % of Energy Cost
1,600 1,517 80% 70%

1,400 70%
1,200 1,037 1,050 60% 49%
962
1,000 50%
800 609 40%
28%
600 30%
344 18%
400 20% 14%
10%
200 10% 0% 0%
0 0%
April 2016 April 2017 April 2018 2016 2017 2018E 2019E
Seasonal Price Average Cost Big users Residential and Commercial
Sources: CAMMESA and Energy Ministry (MINEM).
We expect the 2018 subsidy to be greater than 18% of energy cost, as CAMMESA has extended the
2017-18 summer seasonal price in Ar$ until October 2018.
Whole new pricing scheme for gencos from 2013 to February 2017. In spite of the existence of the
spot market, a new general-scope system came into effect through Resolution 95/2013. In summary, the
gencos started receiving a fixed remuneration for their installed capacity regardless of the plants’ actual
generation, as well as a fixed remuneration tied to the plant’s production variable cost. Both remuneration
prices were fixed in local currency, subject to discretional adjustments from the MINEM (Ministry of
Energy) In addition, CAMMESA was put in charge of fuel cost and provision. Note that the dispatch call
was still determined through the marginal cost approach. In addition, term contracts between private
counterparties were suspended.
From February 2017 to the present: Energy Remuneration Scheme:
 Energía Base, or Legacy Energy Remuneration: Replacing Resolution 95/2013, the new
framework (Resolution 19/2017) consists of two energy price components: (1) fixed component
by capacity. which aims to cover operating fixed costs and, thus, varies widely among
technologies, from US$3,000/MW per month for hydro to US$9,000 for thermal plants; (2)
variable component, which aims to cover variable costs except for fuel that is provided by
CAMMESA, from US$3.50/MWh for hydro to US$5-13/MWh for thermal (thermal actual price
depends on type of fuel, with US$5 for natural gas, US$8 for hydrocarbons, and US$13 for
carbon). CAMMESA still acts as the energy buyer, under three-year contracts. Res 19/2017, in
effect since February 2017, established a price increase in November 2017, which are the prices
currently in force and mentioned in this report.
29
 New capacity remuneration through auctions: Since 2017, the Energy Ministry has placed
new capacity bids for thermal and renewable technologies. (See “Generation, a Growing Sector”
section for further details.) Each awarded project accounts for USD-denominated prices
according to the offer presented. For thermal projects, as in the Energia Base scheme, the price
is split between (i) capacity and (ii) generation. On average, new capacity prices are 127%
greater than legacy capacity prices. Fuel is provided by CAMMESA and thus is not included in
the energy remuneration. For renewable projects, price is tied only to generation volume and
varies widely between projects, with a declining trend. For instance, wind farms’ price ranged
from US$67/MWh to US$37.30/MWh in the most recent auctions. CAMMESA acts as buyer
under contracts between 15-20 years in length.
 Renewable Energy Term Market (MATER; see “Generation, a Growing Sector” section for
further details): In August 2017, the government allowed gencos to sign contracts with large users
with free price determination.
What can we expect going forward? Returning to a market approach?
 Fuel chargeback to gencos. Currently CAMMESA provides the fuel to generators. We believe a
potential shift back to generators is feasible, increasing competition and promoting investments,
as more efficient plants would have greater margins. In addition, we believe this could be coupled
with a liberalization of energy back to the spot market price approach and also allowing term
market contracts once again. Nevertheless, we do not expect this change in the short term, as
the marginal cost remains above regional levels at ~US$70/MWh vs. ~US$50/MWh in Chile, for
example. As more efficient units integrate the energy matrix, the marginal cost converges to
regional levels, and the gap between seasonal and spot prices narrows, it becomes more likely
that the industry will return to a market price approach.
 Term market reopening for non-renewable generation. Currently the contracts between
private companies are restricted to renewable sources. Conventional generation is remunerated
under the Energia Base framework through contracts with CAMMESA and with fixed US$ prices
below the prices awarded in the most recent auctions. For instance, CEPU’s awarded projects
have a capacity price of US$17,000 per MW per month vs. the US$7,000 Energia Base price. In
a competitive market, we expect PPAs to have energy prices within this range but closer to the
auction price.
30
GENERATION, A GROWING SECTOR
The lack of competitive prices for the last 15 years led to dramatically low investment levels and an
inefficient generation matrix. Since Mauricio Macri took office as president in December 2016, the
electricity sector has been promoted through several initiatives with a focus on renewable and thermal
technology. According to the Ministry of Energy forecast, at least 17.2 GW additional capacity will be
added by 2025 from December 2016 levels (~50% of 2016 installed capacity). In detail, the composition
by technology of this new capacity is expected to be: (i) 4.1 GW thermal, (ii) 0.8 GW nuclear, (iii) 2.9 GW
hydro, and (iv) 9.4 GW renewable. In order to reach these figures, the Ministry of Energy has established
public auctions for new generation projects, both thermal and renewable sources. The government’s
effort has already yielded +2.2 GW capacity in 2017, for a total of 36.2 GW, due to a thermal capacity
increase, of which 1.2 GW consists of combined-cycle technology.
Figure 37: Electric Power Matrix by Technology (in GW)
Actual 2025E
Scenarios
70.0
MINEM
58.2
60.0 51.2 Renewable
50.0 12.0
36.9 10.1 Nuclear
40.0 31.4 34.0
27.2 29.9 Thermal
30.0 23.6 24.1 24.6
24.9 30.0 Hydro
20.0 19.1 20.8 23.6
15.6 17.8
13.1 13.1 13.3 Total
10.0
9.2 9.6 9.8 10.2 10.8 10.8 10.8 10.8 13.7 13.7
0.0
Sources: CAMMESA and MINEM.
THERMAL AUCTIONS
For thermal projects, as in the Legacy Energy scheme, the price is split between (i) capacity and (ii)
generation. Price is in U.S. dollars and does not include fuel cost as CAMMESA is in charge of its
provision. PPAs are signed with CAMMESA for 15 years.
 The first round (Resolution SEE 21/16) was focused on rapid commissioning capacity, with the
new thermal generation units to become operational between summer 2016-17 and summer
2017-18. The results were 3,108 MW awarded (~10% of total system); those projects are already
being commissioned as of today. Central Puerto did not win any project in this auction.
31
 The second round (Resolution SEE 287-E/17) focused on combined-cycle and co-generation
plants. The auction resulted in 12 projects awarded (with 1,810 MW), which will start operations in
the next three years. Central Puerto won the auctions of two co-generation projects: Terminal 6
San Lorenzo, with 330 MW capacity, and Lujan de Cuyo with 93 MW capacity. (Details of these
projects are discussed in the “Growth Drivers” section.)
RENEWABLE SOURCES INITIATIVES

The Ministry of Energy established that 20% of large users’ demand must be fulfilled with renewable
sources by 2025; currently that figure is at 2%. In order to achieve this objective, there are two types of
initiatives in place: (1) auctions under the RenovAr program and (2) term market creation.
 RenovAr Program: Auctions have USD-denominated prices per MWh generated. Prices
have varied widely from an average of US$58/MWh in the first round for wind farms to a
range of US$37-47/MWh in the latest round for the same technology. PPAs are signed with
CAMMESA for 20 years. As of the date of this report, the auctions resulted in 4.4 GW
awarded, which will start operations during the next three years. Central Puerto won the
auctions of three wind farm projects: La Castellana (with 99 MW capacity), Achiras (48 MW
capacity), and La Genoveva (87 MW capacity). (Details of these projects are discussed in the
“Growth Drivers” section.)
 Term Market of Renewable Energies (MATER for its acronym in Spanish): Law No. 27,191
provides that large users whose average demand exceeds 300 KW should comply with the
obligation to purchase renewable energy by entering into a contract with a generating
company or through self-generation. The Ministry of Energy and Mining, through Resolution
281-E/ 2017, established the regulatory framework that allows large users to purchase
renewable energy from private generating companies and the conditions for granting the
dispatch priority that allows such transactions to take place, and ensures that the private
generating companies will not be restricted in their generation dispatch in the future.
32
Figure 38. MINEM Target: Large Users’ Energy Demand Fulfilled by Renewable Sources
25%
+2 GW from
RenovAr 2 20%
20% 19%
18%
+2.4 GW (5.7%) 17%
16%
from RenovAr 1
15% and 1.5 14%
12%
10% 8%
5%
2%
0%
2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E
Sources: CAMMESA and MINEM.
GOVERNANCE
BOARD OF DIRECTORS
Central Puerto’s board of directors comprises 11 directors, appointed by the shareholders for a term of
one year with the possibility of re-election. Shareholders are entitled to elect up to one-third of the vacant
seats by cumulative voting. CEPU’s current board of directors comprises six independent members and
five non independent members. Shareholders fix the directors’ compensation, including their salaries and
any additional wages arising from the directors’ permanent performance of any administrative or technical
activity.
The board has substantial experience in the local private sector among a variety of industries (such as
banking and the garment industry).
In addition, CEPU’s corporate governance includes a code to apply best practices, which are based on
strict standards regarding transparency, efficiency, ethics, investor protection ,and equal treatment of
investors. Two other organs complete CEPU’s corporate governance frame: the Audit Committee and the
Supervisory Committee. The Audit Committee comprises three members designated by the board of
directors who hold financial formation; at least two of them are independent. The Supervisory Committee
consists of three members appointed by shareholders.
33
Figure 39. Board of Directors
Name Title Independent (1) Date of expiration
Osvaldo Arturo Reca Chairman N 12/31/2018

Miguel Dodero Director Y 12/31/2018
Oscar Gosio Director Y 12/31/2018
Juan Jose Salas Director Y 12/31/2018
Diego Petracchi Director Y 12/31/2018
Tomas Peres Director N 12/31/2018
Tomas Jose White Director Y 12/31/2018
Jorge Anibal Rauber Vice-Chairman N 12/31/2018
Cristian Lopez Saubidet Director Y 12/31/2018
Jorge Eduardo Villegas Director Y 12/31/2018
Liliana Amelia Murisi Director Y 12/31/2018
Marcelo Artilio Suva Alternate Director N 12/31/2018
Justo Pedro Saenz Alternate Director N 12/31/2018
Adrian Gustavo Salvatore Alternate Director N 12/31/2018
Javier Alejandro Torre Alternate Director N 12/31/2018
Ruben Omar Lopez Alternate Director N 12/31/2018
Oscar Mauricio Guillani Alternate Director Y 12/31/2018
Gonzalo Ballester Alternate Director Y 12/31/2018
Juan Pablo Gauna Otero Alternate Director Y 12/31/2018
Diego Federico Cerdeiro Alternate Director Y 12/31/2018
Pablo Javier Vega Alternate Director Y 12/31/2018
(1) According to CNV rules.
Source: Company reports.
The chairman and vice chairman’s backgrounds follows:
Osvaldo Arturo Reca holds a degree in engineering from the Universidad Católica Argentina. He also
received an advanced degree in 1977 from North Carolina State University in the U.S. His professional
experience includes shareholder and director of Ingeniería de Avanzada S.A., a company engaged in the
deployment of sanitary and gas facilities for housing developments (1980-84); from 1984 to 1989, he
served as general manager of Dufalp S.A., a leading company within the clothing industry; from 1989 to
2002, Mr. Reca served as commercial, operating, and planning manager of Alpargatas S.A., a leading
company in the clothing and footwear industry. In addition, he currently serves as director of DGCE,
IGCU, and IGCE, and chairman of ESSA. He also served as vice chairman of HPDA from 2012 to 2015
and as a director of Transportadora de Gas del Norte S.A., Edesur S.A., and PB Distribución S.A.
Jorge Rauber, vice chairman of the board and CEO of the company, holds a degree in electrical
engineering from the Universidad Nacional de la Plata and post-graduate degree in electrical market
management from the Instituto Tecnológico de Buenos Aires (ITBA). His professional experience,
34
besides Central Puerto, includes: work as a commercial manager of Hidroeléctrica El Chocón S.A, as
planning manager of Endesa Chile, as commercial manager of Central Térmica Dock Sud, and as
commercial manager of AES Argentina Generación S.A. From 2001 to 2012, he served as a member of
the boards of directors of the following companies: CAMMESA, TMB, and Termoeléctrica Guillermo
Brown. He also was AGEERA’s vice president.
EVALUATION OF COMPANY MANAGEMENT/CORPORATE

The management team has a strong and long dated experience within the electricity generation industry
and Central Puerto. For instance, previous to Central Puerto, the CEO has served as part of the
management of Endesa Chile, Central Térmica Dock Sud S.A., and AES Argentina Generación S.A.,
among others. Fernando Bonnet, CFO, has been part of CEPU’s management since 2008 and before
that he served as tax manager of Ernst & Young Argentina. Eduardo Nitardi, engineering director, has
experience in both the transmission and generation segments. He served as top management in
Transener since 1997 in the technical division and in CVOSA as CEO from 2012 to 2015.
Figure 40. Key Management

Date of First
Name Title Appointment to Academic Degree
Position
Jorge Rauber CEO 2017 Electrical Engineering

Fernando Roberto Bonnet CFO 2010 Accounting
Mechanic-Electric
Eduardo Nitardi Engineering Director 2016 Engineering
Alberto Francisco Minnici Production Manager 2015 Electrical Engineering
Control, Planning and Works
José María Saldungaray Manager 2014 Electrical Engineering
Justo Pedro Sáenz Administration Manager 2007 Management Program
General Counsel, Head of Legal
José Manuel Pazos Area 2015 Law
Rubén Omar López Planning and Regulation Manager 2013 Electrical Engineering
Hector Sergio Falzone Commercial and Fuels Manager 2007 Electrical Engineering
Leonardo Marinaro Legal Affairs Manager 2007 Law
Javier Alejandro Torre Human Resources Manager 2016 Human Resources
Rubén Vázquez Renewable Energy Manager 2015 Electrical Engineering
Source: Company reports.
35
OTHER COMPANIES MENTIONED
Distribuidora de Gas Cuyana (DGCU2 AR, Current Price: Ar$55.1, Not rated)
Enel Generacion Costanera (CECO2 AR, Current Price: Ar$13.3, Not rated)
Pampa Energia (PAM US, Current Price: US$48.6, Target Price: US$91, Buy)
AES Tiete (TIET11 BZ, Current Price: R$9.85, Target Price: R$14.81, Hold)
Cesp Cia Energetica De Sao Paulo (CESP6 BZ, Current Price: R$16.25, Target Price: R$16.5, Hold)
Engie Brasil (EGIE3 BZ, Current Price: R$34.20, Target Price: R$42.09, Buy)
Omega Geração (OMGE3 BZ, Current Price: R$15.15, Target Price: R$22, Buy)
Eneva (ENEV3 BZ, Current Price: R$12.80, Target Price: R$17.05, Buy)
Enel Generacion Chile (EOCC US, Current Price: US$21.39, Target Price: US$26.7, Hold)
AES Generacion (AESGENER CI, Current Price: Ch$169.03, Target Price: Ch$182, Hold)
Colbun (COLBUN CI, Current Price: Ch$144.91, Target Price: Ch$146, Hold)
Engie Chile (ECL CI, Current Price: Ch$1272.50, Target Price: Ch$1240, Underperform)
YPF (YPF US, Current Price: US$17.7, Target Price: US$30.10, Buy)
Distribuidora de Gas del Centro (Not Listed)
AES Argentina (Not Listed)
ENEL Argentina (Not Listed)
36
FINANCIAL STATEMENTS
Figure 41. Central Puerto: Financial Statements, 2017–2020E (Millions of Argentinian Peso)
2017A 2018E 2019E 2020E
Income Statement
Net Revenue 5,957 9,285 14,022 18,693
YoY Change (%) 12.0 55.9 51.0 33.3
Cost of Goods Sold (2,742) (4,368) (6,249) (8,037)
Gross Profit 3,215 4,917 7,773 10,656
SG&A Expenses (651) (836) (1,262) (1,402)
Operating Profit 3,111 12,040 6,511 9,254
YoY Change (%) 15.9 287.0 (45.9) 42.1
Financial Results 234 (250) 648 474
FX Gain/Loss - - - -
Other Financial Gains/Losses - - - -
Other Income/Expenses - - - -
Equity Income - - - -
Pre-Tax Profit 4,061 11,790 7,159 9,729
Taxes (1,052) (3,537) (2,148) (2,432)
Minority Interest (14) 359 214 311
Net Profit 3,444 4,321 6,905 9,491
YoY Change (%) 58.3 25.5 59.8 37.5
Depreciation & Amortization (327) (892) (1,330) (1,817)
EBITDA 4,873 7,568 10,818 14,463
YoY Change (%) 27.8 55.3 42.9 33.7
Balance Sheet
Total Assets 17,079 27,915 32,137 36,434
Cash and Equivalents 1,199 231 95 4,130
Accounts Receivable 3,887 11,448 10,949 10,074
Inventories 110 171 274 352
Other Current Assets 614 957 1,446 1,928
Property& Plant and Equipment 7,431 11,080 15,143 15,508
Other Long-Term Assets 3,837 4,029 4,231 4,442
Total Liabilities 9,718 9,633 13,322 14,271
Accounts Payable 1,017 1,173 1,678 2,158
Short-Term Debt 506 1,321 1,561 1,331
Other Current Liabilities 4,375 2,087 4,681 5,725
Long-Term Debt 1,479 2,702 3,062 2,716
Other Long-Term Liabilities 2,341 2,349 2,341 2,341
Minority Interest 289 747 769 906
Shareholders' Equity 7,072 17,535 18,045 21,257
Cash Flow
Net Profit 3,444 4,321 6,905 9,491
Depreciation & Amortization (327) (892) (1,330) (1,817)
Other Noncash Items (2,260) 2,300 (902) (551)
Changes in Working Capital 1,313 (10,097) 3,006 1,838
Operating Cash Flow 2,389 1,348 8,445 10,400
Capital Expenditures (3,484) (4,652) (5,393) (2,182)
Other Investments/(Divestments) 1,182 1,356 (898) 150
Change in Debt 565 2,039 599 (575)
Dividends (1,279) (1,060) (2,889) (3,758)
Capital Increases/Other 36 762 719 805
Net Cash Flow 13 (969) (136) 4,035
Free Cash Flow (1,095) (3,304) 3,053 8,218
Sources: FactSet, Bloomberg, Santander estimates and company reports.
37
FINANCIAL STATEMENTS
Figure 42. Central Puerto: Financial Statements, 2017–2020E (U.S. Dollars in Millions)
2017A 2018E 2019E 2020E
Income Statement
Net Revenue 351 382 492 585
YoY Change (%) 0.0 9.0 28.7 18.9
Cost of Goods Sold (161) (180) (219) (252)
Gross Profit 189 202 273 334
SG&A Expenses (38) (34) (44) (44)
Operating Profit 183 496 228 290
YoY Change (%) 3.6 170.6 (53.9) 26.8
Financial Results 14 (10) 23 15
FX Gain/Loss - - - -
Other Financial Gains/Losses - - - -
Other Income/Expenses - - - -
Equity Income - - - -
Pre-Tax Profit 239 485 251 304
Taxes (62) (146) (75) (76)
Minority Interest (1) 15 7 10
Net Profit 203 178 242 297
YoY Change (%) 41.5 (12.3) 36.2 22.6
Depreciation & Amortization (19) (37) (47) (57)
EBITDA 287 312 380 453
YoY Change (%) 14.2 8.6 21.8 19.3
Balance Sheet
Total Assets 918 1,034 1,071 1,075
Cash and Equivalents 64 9 3 122
Accounts Receivable 209 424 365 297
Inventories 6 6 9 10
Other Current Assets 33 35 48 57
Property& Plant and Equipment 400 410 505 457
Other Long-Term Assets 206 149 141 131
Total Liabilities 522 357 444 421
Accounts Payable 55 43 56 64
Short-Term Debt 27 49 52 39
Other Current Liabilities 235 77 156 169
Long-Term Debt 80 100 102 80
Other Long-Term Liabilities 126 87 78 69
Minority Interest 16 28 26 27
Shareholders' Equity 380 649 602 627
Cash Flow
Net Profit 203 178 242 297
Depreciation & Amortization (19) (37) (47) (57)
Other Noncash Items (133) 95 (32) (17)
Changes in Working Capital 77 (416) 105 58
Operating Cash Flow 141 56 296 326
Capital Expenditures (205) (192) (189) (68)
Other Investments/(Divestments) 70 56 (32) 5
Change in Debt 33 84 21 (18)
Dividends (75) (44) (101) (118)
Capital Increases/Other 2 31 25 25
Net Cash Flow 1 (40) (5) 126
Free Cash Flow (64) (136) 107 257
Sources: FactSet, Bloomberg, Santander estimates and company reports.
38
Central Puerto – Three-Year Stock Performance (US$)
B 20.2
6/11/18
20 1,800
18
1,600
16
1,400
14
1,200
12
10 1,000
J-18 A-18
Central Puerto (L Axis) Merval (R Axis)
Sources: FactSet and Santander.
Valuation & Risks

We valued CEPU based on a DCF model using a WACC of 10.7% and perpetuity of 2.5%.
Main risks include: Macroeconomic risk such as FX disconnection from inflation that could
negatively affect CEPU's margins as it have USD-denominated revenues and part of the costs in
local currency, among others; Regulatory risk such as changes in price schemes and Non-
renewal of Piedra del Aguila Hydroelectric plant concession; and business risk factors, such as
expansion projects execution risk, among others.
Pampa Energia – Valuation & Risks

We value Pampa Energía based on a sum-of-the-parts analysis consisting primarily of DCF
valuations for transmission, distribution and generation using WACC of 9.77%. Risks include: (1)
regulatory risks; (2) sensitivity of earnings to changes in tariff; (3) potential natural gas shortfalls;
(4) geological risk om its E&P segment; and (5) the potential depreciation of the local currency.
AES Gener – Valuation & Risks
Our target price is based on a sum-of-the parts analysis, which values the operations in Chile and
Colombia with a different WACC per country: 8.3% in Chile, 10.5% in Colombia and 13.6% in
Argentina.
Risks include environmental concerns about the construction of coal-fired facilities in Chile,
execution risk of the company's expansion program, hydrological risk, introduction of "green
taxes", changes in long term energy prices and higher capex in Alto Maipo project.
AES Tiete – Valuation & Risks
Our target price is based on a DCF valuation using a WACC of 9.8% in R$ nominal terms. Risks
include: (1) lower-than-expected generation prices; (2) uncertainties regarding the fulfillment of
the expansion requirement; and (3) M&A
Cesp – Valuation & Risks
Our target price is based on a DCF valuation using a cost of equity of 12.4% and no perpetuity.
Risks include (1) concession renewal risks, (2) risk of indemnification lower than expected, (3)
earnings volatility due to US$-denominated debt, and (4) provisions off balance-sheet.
Engie Brasil – Valuation & Risks
Our target price is based on a DCF valuation using a WACC of 9.2% nominal in R$. Risks include
lower-than-expected generation prices, losses in electricity trading, and related-party
transactions.
Omega Geração S.A. – Valuation & Risks
Our target price is based on a DCF valuation using a WACC of 10.9% nominal in R$. Risks
include lower-than-expected generation prices, losses in electricity trading, and related-party
transactions.
39
Eneva – Valuation & Risks
Our target price is based on a DCF valuation using a WACC of 10.0% nominal terms in BRL.
Main risks include lower-than-expected gas supply and, consequently, electric generation;
engineering; greenfield projects; procurement and construction (EPC) risk; funding, and financing
costs.
Enel Generación Chile – Valuation & Risks
Our target price is derived from a sum-of-the-parts methodology, with the cost of capital of Chile.
We use a 2% perpetuity growth rate.
Risks include volumes, different scenario for water supply, taxes changes for generation,
unexpected halt of power plants, increase in raw material prices, exposure to spot market and
changes in the structure of Enel Generación Chile.
Colbun – Valuation & Risks
Our target price is based on a DCF valuation with a WACC of 7.7% and a perpetuity growth rate
of 2%.
Risks include different-than-expected hydro conditions in the central regions of Chile, unexpected
failures at its efficient facilities, different scenario for commodities prices, changes in the local
regulation, lower long term energy prices and higher competition in M&A activity
Engie Energia Chile – Valuation & Risks
Our target price is based on a DCF valuation with a WACC of 6.9% and a perpetuity growth rate
of 2%.
Risks include higher spot prices, increase in natural gas prices, changes in the environmental
laws, failure in generation units, postponement of mining projects, lower than expected decrease
in SING over cost, delay in expansion plan, possibility of capital increase to finance expansion
plan, changes in long term energy prices and contract basis.
YPF SA – Valuation & Risks
We valued YPF based on a DCF model using a WACC of 9.3% and perpetuity of 2.5%.
Main risks include: regulatory risks; sensitivity of earnings to changes in crude oil prices and
related products; and poorer-than-expected production growth and reserve replacement ratios.
40
IMPORTANT DISCLOSURES
Key to Investment Codes

% of % of Companies Provided
Companies Investment Banking
Covered with Services in the Past 12
Rating Definition This Rating Months
Buy (B) Expected to outperform the local market benchmark by more than 10%. 49.83 14.19
Hold (H) Expected to perform within a range of 0% to 10% above the local market
40.14 5.88
benchmark.
Underperform Expected to underperform the local market benchmark. 9.69 0.00
Under Review (U/R) 0.35 0.35
The numbers above reflect our Latin American universe as of Tuesday, June 12, 2018.
For a discussion, if applicable, of the valuation methods used to determine the price targets included in this report and the risks to achieving
these targets, please refer to the latest published research on these stocks. Research is available through your sales representative and other
electronic systems.
Target prices are year-end 2018 unless otherwise specified. Recommendations are based on a total return basis (expected share price
appreciation + prospective dividend yield) unless otherwise specified.
Stock price charts and rating histories for companies discussed in this report are also available by written request to Santander Investment
Securities Inc., 45 East 53rd Street, 17th Floor (Attn: Research Disclosures), New York, NY 10022 USA.
Ratings are established when the firm sets a target price and/or when maintaining or reiterating the rating. Ratings may not coincide with the above
methodology due to price volatility. Management reserves the right to maintain or to modify ratings on any specific stock and will disclose this in the
report when it occurs. Valuation methodologies vary from stock to stock, analyst to analyst, and country to country. Any investment in Latin American
equities is, by its nature, risky. A full discussion of valuation methodology and risks related to achieving the target price of the subject security is included
in the body of this report.
The benchmark used for local market performance is the country risk of each country plus the 1-year U.S. Treasury yield plus 5.5% of equity risk
premium, unless otherwise specified. The benchmark plus the 10.0% differential used to determine the rating is time adjusted to make it comparable
with the total return of the stock over the same period. For additional information about our rating methodology, please call (212) 350 3974.
This research report (“report”) has been prepared by Santander Investment Securities Inc. ("SIS"; SIS is a subsidiary of Santander Holdings USA, Inc.
which is wholly owned by Banco Santander, S.A. "Santander"]) on behalf of itself and its affiliates (collectively, Grupo Santander) and is provided for
information purposes only. This report must not be considered as an offer to sell or a solicitation of an offer to buy any relevant securities (i.e., securities
mentioned herein or of the same issuer and/or options, warrants, or rights with respect to or interests in any such securities).
Any decision by the recipient to buy or to sell should be based on publicly available information on the related security and, where appropriate, should
take into account the content of the related prospectus filed with and available from the entity governing the related market and the company issuing the
security. This report is issued in Spain by Santander Investment Bolsa, Sociedad de Valores, S.A. (“Santander Investment Bolsa”) and in the United
Kingdom by Banco Santander, S.A., London Branch. Santander London is authorized by the Bank of Spain. This report is not being issued to private
customers. SIS, Santander London and Santander Investment Bolsa are members of Grupo Santander.
The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed, that
their recommendations reflect solely and exclusively their personal opinions, and that such opinions were prepared in an independent and autonomous
manner, including as regards the institution to which they are linked, and that they have not received and will not receive direct or indirect compensation
in exchange for expressing specific recommendations or views in this report, since their compensation and the compensation system applying to Grupo
Santander and any of its affiliates is not pegged to the pricing of any of the securities issued by the companies evaluated in the report, or to the income
arising from the businesses and financial transactions carried out by Grupo Santander and any of its affiliates: Antonella Rapuano*, Thiago Silva* and
Walter Chiarvesio*
*Employed by a non-US affiliate of Santander Investment Securities Inc. and is not registered/qualified as a research analyst under FINRA rules and is
not an associated person of the member firm, and, therefore, may not be subject to FINRA Rule 2241 and Incorporated NYSE Rule 472 restrictions on
communications with a subject company, public appearances, and trading securities held by a research analyst account.
As per the requirements of the Brazilian CVM, the following analysts hereby certify that we do not maintain a relationship with any individual working for
the companies whose securities were evaluated in the disclosed report. That we do not own, directly or indirectly, securities issued by the company
evaluated. That we are not involved in the acquisition, disposal and intermediation of such securities on the market: Thiago Silva.
Grupo Santander receives non-investment banking revenue from Cesp, Eneva, Engie Brasil, Omega Geração S.A., Pampa Energia, and YPF SA
Within the past 12 months, Grupo Santander has managed or co-managed a public offering of securities of AES Tiete, Colbun, Eneva, and Omega
Geração S.A.
Within the past 12 months, Grupo Santander has received compensation for investment banking services from AES Tiete, Eneva, Omega Geração S.A.,
Pampa Energia, and YPF SA
In the next three months, Grupo Santander expects to receive or intends to seek compensation for investment banking services from Enel Generación
Chile, and YPF SA
Santander or its affiliates and the securities investment clubs, portfolios and funds managed by them do not have any direct or indirect ownership
interest equal to or higher than one percent (1%) of the capital stock of any of the companies whose securities were evaluated in this report and are not
involved in the acquisition, disposal and intermediation of such securities on the market
The information contained within this report has been compiled from sources believed to be reliable. Although all reasonable care has been taken to
ensure the information contained within these reports is not untrue or misleading, we make no representation that such information is accurate or
complete and it should not be relied upon as such. All opinions and estimates included within this report constitute our judgment as of the date of the
report and are subject to change without notice.
From time to time, Grupo Santander and/or any of its officers or directors may have a long or short position in, or otherwise be directly or indirectly
interested in, the securities, options, rights or warrants of companies mentioned herein.
Any U.S. recipient of this report (other than a registered broker-dealer or a bank acting in a broker-dealer capacity) that would like to effect any
transaction in any security discussed herein should contact and place orders in the United States with SIS, which, without in any way limiting the
foregoing, accepts responsibility (solely for purposes of and within the meaning of Rule 15a-6 under the U.S. Securities Exchange Act of 1934) for this
report and its dissemination in the United States.
© 2018 by Santander Investment Securities Inc. All Rights Reserved.
41

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LATIN AMERICAN

CENTRAL PUERTO BUY

Estimates & Valuation Ratios Price Performance (US$)

IMPORTANT DISCLOSURES/CERTIFICATIONS ARE IN THE “IMPORTANT DISCLOSURES” SECTION OF THIS REPORT.

Figure 2. Enterprise Value per MW of Installed Capacity Measured in USD million

Figure 3. Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis

CENTRAL PUERTO AT A GLANCE

Central Puerto Pampa Energia AES ENEL Others

Figure 5. CEPU’s Energetic Matrix by Technology (in MW)

Source: Company data, excludes FONINVEMEM plants.

Figure 7: CEPU’s Thermal Power Generation by Fuel Type (in GWh)

Puerto Complex Lujan de Cuyo Piedra del Aguila

Installed Capacity (MW) 1,714 509 1,440

Generation (GWh)1 6,991 2,450 2,137

Availability2 91% 91% 100%

Sales under contract (GWh)1 45 78 0

Energy purchases (GWh)1 2 69 0

Limay River, bordering the provinces of

Concession expiration date NM NM December 29, 2023

Source: Company data, excludes FONINVEMEM plants.

Bs As City + Cuyo Comahue

Figure 11. Heat Rate Breakdown by Facility

1604 1617 1692

Combined Cycle Steam Turbines

Central Puerto AES ENEL Pampa Energia

Figure 13. Thermal Supply Curve

Source: CAMMESA seasonal program data.

Figure 14. CEPU’s Non-Controlling Interest

Source: Company data.

Sources: Santander estimates and actual figures from company’s report.

450 59% 61% 61% 70% 400

EBITDA EBITDA Margin 2017 2018 2019 2020 2021 2022

Sources: Santander estimates and actual figures from company’s report

Figure 17. Central Puerto DCF Valuation Model

= 10Y NPV 1,495 Risk Free 3.0%

Source: Santander estimates.

We highlight the following main assumptions:

Figure 18. Main Assumptions

2016 2017 2018E 2019E 2020E 2021E 2022E

Volume in GWh 15,645 16,607 13,711 17,279 19,618 20,877 20,877

Avg Price in US$/GWh 22 21 28 28 29 30 30

Capex (US$ mn) 144 205 192 189 70 63 63

FONINVEMEM collection (US$ mn) 20 21 78 78 60 55 55

Sources: Santander estimates and company data.

 FONINVEMEM collections: FONINVEMEM installments, applied to cancel receivables, imply

Figure 19. Volume Growth (in GWh)

Sources: Santander estimates and company data.

Source: Santander estimates.

Figure 21. Target Price Sensitivity to Energy Dispatch

TP Sensitivity to Energy Dispatch and Ke

Source: Santander estimates.

VALUE FROM ASSOCIATES AND FIXED ASSETS IN INVENTORY

Figure 22. Associates and Fixed Assets Valuation

Source: Santander estimates.

Figure 23. NPV Contribution from Units

DGCE AND DGCU VALUATION

Figure 24. DGCE and DGCU DCF Valuation Model

Figure 25. Thermal Projects Pipeline

Terminal 6 - San Lorenzo Lujan de Cuyo

San Lorenzo, Lujan de Cuyo, Mendoza

Expected commercial operation date May-20 Nov-19

Estimated total capital expenditure

Awarded electric capacity 330 MW 93 MW

Technical configuration Co-generation Co-generation